ECON 2450 Chapter Notes - Chapter 1: Chlordiazepoxide, Diminishing Returns, Real Wages

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10 Feb 2016

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Canada and u. s. trade two products with each other - automobiles (a) and cloth (c). Each product is produced using labour only but there are two types of workers in each industry: skilled (s) and unskilled (u). Unskilled workers can easily change occupation and move from one industry to another if they can earn more there. Skilled workers, however, cannot change occupa- tion because their skills are speci(cid:133)c to the industry in which they work. For example, in the clothing industry there is no demand for skilled mechanics who spent most of their lives assembling cars. U is a mobile factor of production, while sa and sc are (cid:145)speci(cid:133)c factors(cid:146)- a skilled auto worker can only work in automobile industry, and a skilled clothing worker can only work in a clothing industry. Both auto and clothing industries experience diminishing returns to each type of labor.

Related Questions

Read the articles and consider two people, Mon and Shaman, that can produce 2 goods, shrimp and mobile apps.

If Mon and Shaman devoted themselves to shrimp and mobile app production, the chart below shows how much each person can produce per hour.

Complete the first table by showing how many shrimp and mobile apps each person would produce if they did not specialize.

	Hours worked per year			Total amount produced if each person devotes all their working hours per year to each good.
		Shrimp per hour	Mobile Apps per hour	Total Shrimp	Total Mobile Apps
Mon	3500	50	1
Shaman	2000	10	5

In a world hungry for cheap shrimp, migrants labor overtime in Thai sheds

By Jason Motlagh, Published: September 19, 2012

Jason Motlagh/For The Washington Post - Burmese migrant workers peel shrimp at a processing factory in Samut Sakhon province in Thailand. High standards allow the factory to export its seafood to the United States.

MAHACHAI, Thailand â At an age when she should have been in a classroom, Thazin Mon discovered her knack for peeling shrimp. To help support her Burmese migrant family, the 14-year-old pulled 16-hour shifts, seven days a week, for less than $3 a day. âI am uneducated, so I work. I have to work bravely,â she says.

Although she was the best peeler in the factory, speed was never enough. Mon was beaten if she slowed down, she said, and when she asked for a day off to rest hands swollen with infection, her boss kicked her and threatened rape.

Thanks to a bottomless appetite for cheap shrimp in the West, Burmese migrants such as Mon are the backbone of a Thai shrimp industry that is the worldâs third largest. The United States is Thailandâs top customer, accounting for a third of the countryâs annual shrimp exports.

Rights groups say that overseas demand for shrimp products in greater volume has fueled a culture of exploitation in the Thai industry. They insist that the failure of foreign companies to sufficiently verify the origin of the shrimp they import allows abuses to persist.

âIf you look at the cost of shrimp overseas, itâs very, very cheap, and that comes from the exploitation inherent in the shrimp industry,â says Andy Hall, an expert on migration at Mahidol University who tracks Burmese labor in the Thai seafood industry.

Brisk business with major U.S. retailers such as Wal-Mart, Costco, Samâs Club and Red Lobster pumps more than $1 billion in revenue each year into the Thai economy, the second largest in Southeast Asia. As Thai living standards have risen, a shortage of unskilled labor has attracted tens of thousands of Burmese migrants looking to escape the poverty and job scarcity that has gripped their homeland for decades.

Most head to Samut Sakhon province, the heart of the processing industry just south of the capital, Bangkok, where modern facilities line the highway alongside fast-food chains and car dealerships. The more prominent factories are the size of football fields, with neon signage and billboards that feature smiling children. But thereâs a darker side behind the scenes, activists say.

Of an estimated 400,000 migrants at work in the province, only about 70,000 are legally registered. The rest are employed illegally in anonymous peeling sheds that supply the larger companies that must fill massive orders from abroad. At this lower end of the supply chain, according to migrant activists, crooked brokers and employers trap scores of Burmese in abusive conditions tantamount to slavery, particularly in the shrimp industry.

âThe small factory owners know that most of their workers are undocumented, so they can control the workforce however they want â such as locking workers in until they finish their work,â says Sompong Sakaew, a labor activist based in Mahachai, the provincial capital. âThere are also teenagers between 12 and 17 years old in the workforce.â

Sold into waking nightmare

Problems for Burmese migrants typically start as soon as they link up with brokers who promise steady work and a decent salary, only to sell them into a nearly inescapable cycle of debt bondage.

Min Oo, 28, a Burmese farmer who lost his home in a flood, said he paid a broker the equivalent of $500 to smuggle him across the border to Samut Sakhon, with the guarantee of a minimum-wage (about $10 a day) factory job. Instead, he said, the broker sold him into a waking nightmare, with 18-hour workdays in a shrimp-processing factory and net earnings of no more than $20 a week, leaving almost nothing to send home.

In some cases, migrant workers and rights groups allege, police officials or their relatives hold an ownership stake in unregistered peeling sheds. More commonly, the critics say, the authorities or those they protect shake down undocumented workers for bribes to supplement their incomes, knowing that the migrants would rather pay up on the spot than be deported to Burma.

Despite occasional police action and robust anti-trafficking laws, Sakaew, the labor activist, estimates that fully a quarter of the 1,200 to 1,300 factories in Samut Sakhon province are unregistered and, therefore, ripe for abuse. With so much profit-induced apathy on the Thai side, activists say reform pressure must come from Western companies whose trade partnerships drive the shrimp industry.

Codes of conduct

It is difficult to establish precise links between the larger Thai companies that process shrimp of dubious origin and the Western companies whose consumers increasingly demand ethical sourcing.

To do business overseas, Thai companies must qualify for membership in the Thai Frozen Foods Association, which adheres to globally recognized codes of conduct and carries out unscheduled inspections. Spokesman Arthon Piboonthanapatana asserts that anyone found guilty of labor -abuses would be expelled. In more than three years of inspections, he said, this has never happened.

âIf the shrimp is from TFFA members, I can 100 percent guaranteeâ that it is produced without labor exploitation, he said.

But critics say that until the Thai shrimp industry requires larger factories to provide records of lower-level suppliers and follows through with random inspections, the shrimp it exports will remain tainted by human trafficking and labor abuses.

For the past three years, the State Department has given Thailand a poor grade on human trafficking, citing it among countries that do not fully comply with the minimum standards for efforts to combat the problem.

After the release of the departmentâs report in 2012, Thai Foreign Minister Surapong Tovichakchaikul said his country would improve its performance by strengthening cooperation among agencies tasked with fighting human trafficking.

Motlagh reported with a grant from the Pulitzer Center on Crisis Reporting.

More world news coverage: - Turmoil in Egypt stalls talks on U.S. aid - Suicide blast kills 12 near Afghan capitalâs international airport - U.S. troops to cut missions with Afghan forces - Read more headlines from around the world.

Google reportedly acquiring Waze app for $1.3 billion

News ends months of rumors on deals with Apple, Facebook, or Google, according to Globes; Waze source refuses to comment

By David Shamah June 9, 2013, 7:20 pm

Waze co-founder Uri Levine at a Jerusalem conference in May (photo credit: Flash90)

After dating at least three of the biggest tech companies in the world, it appeared Sunday night that Waze was finally getting the ring â one worth $1.3 billion, according to a report in the Israeli business newspaper Globes.

Thatâs the sum Google has reportedly agreed to pay for Waze, the Raâanana-based crowdsourced driving and navigation app with 50 million users around the world. The figure is $300 million higher than Facebook reportedly offered to pay for the firm earlier this year.

A company source contacted by The Times of Israel had no comment on whether talks with Google (or any other party) were on or off. âWe donât comment on rumors and speculation in general,â the source said.

The purchase, reported by Globes citing an anonymous source, would be the biggest buyout yet for an Israeli consumer firm, far outstripping Face.comâs $60-million sale to Facebook last year. Indeed, it is believed that it would be the biggest sum paid for any app, ever.

In May, it was rumored that Facebook had offered nearly $1 billion for Waze, but negotiations broke down several weeks later, apparently over Facebookâs insistence that Waze move its R&D from Israel to one of Facebookâs existing facilities, in the US or Britain. Several weeks later, it was reported that Google was interested in Waze, and that the search giant had offered as much as $1 billion for the company as well.

Previous rumors â earlier this year â had Apple as a prospective Waze buyer, with an offer of $400 million for the Israeli company.

A Google-Waze deal would likely not get snagged over location; Google already has several large R&D facilities in Israel, and employs hundreds of engineers here. Integrating the already existing Waze group into the Google infrastructure would be much simpler than getting Waze integrated with Facebook, local social media expert Yotam Tavor told The Times of Israel.

However, it appears that location wasnât the only issue. As recently as several weeks ago â amid the rumors that Google was poised to make an offer for Waze â company insiders were quoted in news reports as saying that members of the Waze board of directors believed that they would be selling themselves short if they âsettledâ for $1 billion â and that they could raise much more with an IPO. How much Waze would fetch in an IPO isnât clear, but if the latest report is true, Google apparently agrees with the Waze officials opposed to a sale.

Google already has its own mapping and driving app, and competes with Waze, but the latter dominates in most of the markets where Googleâs Navigator app is used. As such, Google and Waze are competing in the same space, but most users agree that the Waze app is much more elegant and user-friendly than the Google one.

In addition, Waze has built an active and loyal social network, which is highly engaged with the app, as well as a built-in mobile ad platform. In its latest version, it supplies Google Maps-like recommendations â making it a perfect match for Google, Tavor said.

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	The Outcome Without Trade		The Outcome With Trade				The Gains From Trade
	What they Produce and Consume if they do not specialize according to comparative advantage.		What They Produce if they fully specialize in one good.	What They Trade	What They Consume		The Increase in Consumption
Mon	1.)	Point A	5.)	9.) 10.)	13.)	Point A^*	17.)	A to A^*
	2.)		6.)		14.)		18.)
Shaman	3.)	Point B	7.)	11.) 12.)	15.)	Point B^*	19.)	B to B^*
	4.)		8.)		16.)		20.)

Suppose Mon and Shaman do not specialize according to comparative advantage and exchange but instead choose to be self-sufficient.

Further, they devote half of their hours in each year to each good and they consume everything they produce domestically.

After specialization according to comparative advantage, they exchange 5,000 apps for 75,000 shrimp.

Compute values for the numbered cells.

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What is the opportunity cost of producing shrimp for Mon?

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What is the opportunity cost of producing Mobile Apps for Mon?

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1.) Before specialization, how much shrimp will Mon produce?

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2.) Before specialization, how many mobile apps will Mon produce?

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3.) Before specialization, how much shrimp will Shaman produce?

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4.) Before specialization, how many mobile apps will Shaman produce?

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5.) If they specialize according to comparative advantage, how much shrimp will Mon produce?

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6.) If they specialize according to comparative advantage, how many mobile apps will Mon produce?

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7.) If they specialize according to comparative advantage, how much shrimp will Shaman produce?

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8.) If they specialize according to comparative advantage, how many mobile apps will Shaman produce?

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9.) After specialization according to comparative advantage, they exchange 5,000 apps for 75,000 shrimp, i.e. each country sells some of the good in which they have a comparative advantage for the good in which they have a comparative disadvantage.

How much shrimp will Mon trade?

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10.) How many mobile apps will Mon trade?

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11.) How much shrimp will Shaman trade?

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12.) How many mobile apps will Shaman trade?

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13.) After trade, how much shrimp will Mon consume?

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14.) After trade, how many mobile apps will Mon consume?

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15.) After trade, how much shrimp will Shaman consume?

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16.) After trade, how many mobile apps will Shaman consume?

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17.) After trade, Monâs shrimp consumption increased by how much?

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18.) After trade, Monâs mobile app consumption increased by how much?

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19.) After trade, Shamanâs shrimp consumption increased by how much?

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20.) After trade, Shamanâs mobile consumption increased by how much?

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What is the total amount of shrimp produced if Mon fully specializes in shrimp production?

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How many mobile apps will Shaman produce if he fully specializes in producing mobile apps?

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raspberrytiger386

Case Study 8
THE OUTSOURCING SYNDROME

In Case Study # 3, we discussed some of the economic and ethical problems related to Wal-Mart. However, is it fair to blame Wal-Mart for this downsizing of our standards? What about the other large U.S. corporations that have been sending manufacturing and other jobs overseas? Lou Dobbs, on CNN, in late 2003, started listing during each evening program those corporations which have sent jobs overseas. The list keeps growing and growing. It is a virtual Whoâs Who of American business.

In late December, 2003, the Wall Street Journal reported that IBM told its managers that it will be moving as many as 4,700 high paying white-collar jobs overseas. This type of change represents the latest threat to employment in the U.S. It was bad enough to see the exodus of manufacturing jobs but, now, this move overseas is extending to the higher-paying technical and white-collar employees.

When U.S. corporations first started shipping factory jobs overseas, workers were advised that they should become better educated and acquire more skills, enabling them to achieve an even higher standard of living. There would be more and better jobs in technology and information processing. Now, it is these more educated and skilled workers at IBM and other corporations who are losing their jobs. To be fair to IBM, many other technical companies have also moved these higher paying jobs overseas. An executive at Microsoft, the ultimate American success story, told his department heads last year to âpick something to move offshore todayâ.

Globalization may be a fact of life but does that mean that its destructive impact on any
single countryâs families can't be mitigated? Should the exportation of jobs and the effect on the standard of living be monitored by the government, the civic center sector and the media of the base country? Should trade agreements and tax policies be examined and updated to encourage the creation of employment that enhances the quality of life at home?

If we donât do something about all of these issues, we may all end up working at Wal-Mart, by one name or another. If we donât do something, then who will be able to afford the IBM and Microsoft products?

Almost 100 years ago, Henry Ford was astute enough to realize that he had to pay his workers a living wage so that they could afford to buy his automobiles. Evidently, American manufacturers have forgotten that strategy. Will the rest of the world follow suit?

HOW DO YOU FEEL ABOUT THIS SITUATION?
WHAT SUGGESTIONS DO YOU HAVE TO ADDRESS THIS ESCALATING PROBLEM?
WHAT WOULD YOU RECOMMEND IF YOU HAD AN IMPORTANT GOVERNMENT POSITION?

limeporcupine327

Case Study #3

TO WAL-MART OR NOT TO WAL-MART?

Wal-Mart is a $250-billion-a-year retailer. Eighty two percent of U.S. households made a

Wal-Mart purchase in 2002. It is the largest company in the world with a global

workforce of 1.4 million. Where Wal-Mart competes the average grocery prices are 14%

lower. In the past it was General Motors, IBM and other companies that were considered

to be the leaders in industry and the ones to watch. Now it is Wal-Mart that is being

studied in universities around the world.

At Wal-Mart, cost is king. Costs are kept low and this translates into goods being sold

for less. The entire organization is focused on reducing costs and passing those savings

on to the consumer. This allows poor people to buy food and other necessities that they

otherwise might not be able to afford. In the U.S. it dominates sales in a number of

categories : 32% of disposable diapers, 30% of hair products, 26% of toothpaste, 20% of

pet food and 13% of textiles.

Wal-Mart simply has developed the most efficient methods for operating their business.

Their inventory management, through a network of scanners, computers, and at-the-ready

suppliers, makes it the leader in successful turnover of inventory. How can we blame

Wal-Mart for being the efficient cost conscious giant that it is?

The Wal-Mart phenomenon has occurred at the same time that high-paying skilled jobs

are being lost in the manufacturing sector. When these jobs are lost, the alternative often

means being employed at Wal-Mart at a much lower pay scale with reduced benefits

such as medical insurance. Its labor costs are twenty percent less than those at

unionized supermarkets, and sales clerks make less, on average, than the federal poverty

level ($8.50 an hour).

Barbara Ehrenreich* has described the problems faced by the under class, such

as waitresses and Wal-Mart employees. They barely survive on a day-to-day basis, living

from hand to mouth, with no reserves, no safety net, no medical insurance and almost no

prospect of improving their positions in life.

The loss of manufacturing jobs has affected the lifestyles of many people. What they see

is the reality of reduced opportunity with a permanent reduction in wages and standards

of living. They are trapped in a new marketplace, with diminishing expectations and few

alternatives to shopping at Wal-Mart. This is a change in our American culture--the

dreams have now been down-sized.

Is Wal-Mart the hero or the culprit? After all, low prices, competition, and growth have

all been mantras that Americans have been chanting all of our lives. We were

told that if you built a better mouse trap, everyone would come to you. Well, Wal-Mart

has built a better mouse trap. Is there any logic in our looking at Wal-Mart as a

contributor to the loss of some our middle class or is it just jealousy and sour grapes?

For one thing, its hard line on costs has forced many factories to move overseas.

Wal-Mart imported most of the items it sells. Environmental standards

are lower in these countries where these goods are manufactured than they are in the

U.S. This probably results in increased health issues and costs. In addition, shipment of

goods many thousands of miles to their ultimate destinations, involve utilizing the

worldâs limited oil resources. When you add up all this, the cost of the goods may be

greater than if they were produced in this country.

Another issue is that Wal-Mart is a non-union employer paying wages that are below the

poverty level, with minimal health insurance coverage. As many employees cannot

afford the co-payment required for doctors office visits, when a medical crisis occurs they

are forced to use the emergency room facilities of local hospitals. The result is that the

community bears the direct cost of their medical treatment and the indirect, as well as

ancillary costs such as diminished work capacity, child care, etc.

There are other economic ramifications to the Wal-Mart explosion. When Wal-Mart

arrives in a town, âmain streetâ erodes. Neighborhood stores that used to provide goods,

services and paid their workers well, are eliminated, uprooting families and ways of life

in the process. The Wal-Mart decision to saturate Oklahoma City, resulted in the closure

of 30 supermarkets.

If Americans shop with price being the only factor that determines where they

purchase their goods, doesnât this mean the permanent down-sizing of our standard of

living? How can the local retail establishment survive when they canât compete with a

Wal-Mart? Look at what has happened to the local supermarket, bookstore, hardware

and clothing store. The demise of these small business constitutes the loss of a middle

class of society in a community. We need to think: As consumers are we better off

paying a little more to enable the local merchants and their families to survive in order to

preserve the character of our communities and society or should we concern ourselves

with price only?

HERE IS YOUR DILEMMA:

You are the mayor of a small city in the West. You canât worry about the 4,700 workers

at IBM and the other workers at technology companies who lost their jobs. Your problem

is a more local one.

A Wal-Mart representative has approached you about the possibility of building a super-

store within your city limits. The store would serve communities within a twenty-five mile

radius. The land that they intend to build upon would require new zoning. Wal-Mart

would expect a certain amount of property tax and other relief. If your city does not

want a super-store, you are certain that one of the other towns close-by would be happy

to accommodate their needs.

What studies would you require before deciding which way to vote? What ramifications

do you foresee with this new super-store? What would you ask of Wal-Mart before

agreeing to their request? How much input would you seek from the residents of your

city

blushimpala894

ECON 2450 Chapter Notes - Chapter 1: Chlordiazepoxide, Diminishing Returns, Real Wages

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